Joannes is a French intellectual. But not one of the arrogant ones.

On top of running a 60-person company, he is a Bitcoin thought leader.

We talk about the moral compass of bitcoin it's role in humanity. A thought-provoking conversation.

Check out his essay A Weirder Bitcoin.

Also mentioned: Author and Philosopher Nassim Taleb and The Coffee Trader: A Novel

Full transcript:
Joannes V:What got me interested into Bitcoin, it was not money. It was something that came with the money. By giving people economic freedom, it was a way for people to give them more capability to do good.

PROMO:Humans of Bitcoin is part of the Bitcoin.com podcast network. Learn about Bitcoin, create a wallet, and buy your first Satoshis at Bitcoin.com.

Matt Aaron:Hello, and welcome to the third episode of season two. A lot of times you hear people talking about Bitcoin, sometimes the buzzword blockchain, being trustless, but as Joannes will argue today, nothing is further from the truth. We talk about the importance of remembering the problem and not focusing on the solution, the power of incentives, the power of skin in the game, and that cash is the most unifying social contract known to mankind to induce ethical behavior, separating right from wrong. A really deep conversation on the morality behind Bitcoin. We talk about the idea that a lot of complexities in the world, a lot of interest, a lot of human interest, when a lot of people are excited about something and spending time on it, and you may be tempted to say, "Oh, they're pointless. This doesn't make any sense." Maybe it's worth thinking about it and reserving judgment until you understand exactly what's going on.
For Joannes, that's Bitcoin. He's incredibly intelligent, and I made sure throughout the interview that he explained things in layman's terms, so that his ideas could be understood by everyone. Enjoy the interview. We had a lot of fun.
He has vast technical knowledge, both in mathematics and computer science, and he's running a 60 person company, Lokad, which is quantitative supply chain optimization software. He's very strategic in what he does, and he's also the author of A Weirder Bitcoin, a kind of tongue in cheek idea that implies the importance of Bitcoin, and trust, and economic freedom in the world. Joannes Vermorel. Thanks so much for coming on the show.

Joannes V:Thank you so much.

Matt Aaron:Joannes, I can tell just talking with you beforehand, you're quite clever. What are some interesting policies or strategies that Lokad implies in terms of the way you do business that you think the public would find interesting.

Joannes V:We optimize quantitatively supply chain. It might sound very abstract, but the reality is the world has gone global. I know it sounds like obvious, but literally, the world has decided that half of the stuff that you are actually using in your daily life is produced in China, in the other side of the world if you happen to be in Europe or in the US. Basically, those economies have become a lot more complex, and everything is now built, in many countries ... I mean, when you say the iPhone is coming from China, this is not true. The iPhone is coming from, actually, 40 different countries. You have parts that are manufactured in Taiwan, some in South America. I mean, it's very complex. Those supply chains are very complex.
The very good news is that you get stuff for a much lower price. Those lower prices where you can buy a super cheap T-shirt, it's thanks to this globalization. You know, it didn't fall from the sky. The only downside is that suddenly it becomes very complex, and if you want to optimize it, you need computers, and that's exactly what we do. It becomes so complex that you need computers to do more supply chain optimization. That's what Lokad does.

Matt Aaronerfect. Okay, makes sense. That's what Lokad does. I guess I was aiming a little bit more towards company policies. You mentioned how you reuse batteries or the culture, because just working with Alexander, who's doing a great job on the sound and helping you out with this interview, I can tell that you're very organized. What's the culture at Lokad like?
Joannes V:First, I would say it's difficult, because I have brought a lot of very, very smart people, so I'm primarily speaking for myself as a CEO, but I'm not the only one to have a valid opinion on this matter. I believe is one key idea, is that you need to fall in love with the problem, not fall in love with the solution. I mean, you can do something better for the world, but first it needs to understand the world a little bit. The good news is that your understanding of the world will remain even if your solution gets obsolete. That's what technology's about. Things change all the time, but what do not change is fundamentally the problem.
That's a very interesting perspective, and it applies, also, I believe, to a logic stand to Bitcoin, and to what we do in general. The culture is, "How can we do something better?" Usually, the only things that prevents us, at Lokad, from doing something better, is that we don't have a sufficient grasp of the very problems that we are trying to solve. I think it's part of the culture to challenge our own understanding of the problem before jumping into inventing, I would say, a myriad of new solutions. Problems first, solutions are just second class citizens that are disposable.
Matt Aaron:It makes a lot of sense. I like that law, or heuristic, to guide the company. It's not really about the supply chain optimization software. It's about the problems and the complexity of the supply chain itself, which you mentioned with the iPhone example, right?
Joannes V:Yeah, and supply chain, you can really think of it's very real world. I mean, you can't get more real than having a warehouse that has just been flooded. The world, supply chains that fail, they're very, very messy. I mean, they kind of fail in very bizarre ways. You have a tsunami, you have a big supply chain problem. You have a tornado, big supply chain problems. You have a strike, big supply chain problem. You see, it's the entire world, and the chaos of the world is interfering with you, with your work, which is just delivering to people the bottle of milk that they want. The endgame is something very simple. You want to get them the food they want to enjoy, [inaudible 00:06:11]. I mean, it's very mundane. It's simple, and yet there is so many problems that just seems to ... Like an unending stream of varied disasters that keeps happening. This is supply chain for me.
That makes them very interesting, and very quite funny business wise. People would not see it that way, but it's a very interesting area.
Matt Aaron:For sure, because some people, when you say supply chain logistics, they're like, "Boring," but they don't think about the applications. I think a friend of mine, who's ex-military, one quote he's told me, that's always stuck with me, is that, "Matt, life is all about logistics. You look at the way that people operate in different countries, and customs, and cultures. It's all logistics."
Joannes V:I mean, just think how many people in the US spend doing commutes, much time they spend commuting. Again, I mean, people can delegate like two hours and a half daily of their life to a logistical problem, and they do that by being in their car two hours and a half a day.
Matt Aaron:I'm curious. How long is your commute to Lokad?
Joannes V:Five minutes.
Matt Aaron:Five minutes.
Joannes V:You know, I start everything of my day by actually bringing my daughter to her school, which is five minutes away from my apartment, and then after dropping my daughter to school, I can walk further, something like seven minutes, actually, to go to the Lokad office. I think I'm at a good understanding of the problem, so I choose to make my life simple, precisely not to dedicate my life to my wheel, or whatever.
Matt Aaron:You've figured out the commute part, so five minutes walking?
Joannes V:Yes.
Matt Aaron:Cool. Joannes, what else? What do you do on weekends?
Joannes V:Very esoteric stuff. I'm a big fan of deep learning, and [inaudible 00:07:49] in general, so I usually spend quite a lot of time reading papers, which is not exactly your average occupation, I guess, but then I have also a seven years old daughter, and just family life. Very mundane stuff, but I enjoy that a lot, as well. That keep me sane.
Matt Aaron:That's great. What were you doing before Lokad?
Joannes V:I was a PhD student, but I never completed my PhD, so technically, I'm a PhD dropout.
Matt Aaron:I have to add something here, Joannes, you're actually coming right after Ryan Charles. This is the second PhD dropout in a row that we've had in the podcast. Ryan was PhD dropout, so this is the PhD Dropout show. Ryan was six months from finishing his PhD, but when he discovered Bitcoin in 2011, he said, "Six months? That's too much time. That's too much life to waste on something that I don't think I'm going to use."
Joannes V:Yeah, a club of PhD dropouts.
Matt Aaronh, wow.
Joannes V:I think I did better than that. At Lokad, was co-founded by two people, Esther Vermorel, my wife, who's also a PhD dropout, so it's not just one PhD dropout. We managed to have to waste two PhDs in the process.
Matt Aaron:Both you and your wife dropped out of your PhD program to start this company?
Joannes V:Yes.
Matt Aaronkay, very interesting. Very interesting. It would be cool to compare. I know why Ryan did. Why did you decide not to finish?
Joannes V:My PhD supervisor was, and still is, an incredibly talented man. Super smart.
Matt Aaronorry, what was the PhD in? Just for the listeners.
Joannes V:I was doing computational biology.
Matt Aaron:Computational biology. Okay. Keep going.
Joannes V:My supervisor, Jean-Philippe Vert is a brilliant researcher, I would say. There were so many incredibly smart researchers in this area that I decided I can be, hopefully, one smart person, additional to a crowd of incredibly talented people. I was thinking that my additional value was actually quite low. Again, there were people, like my PhD supervisor, who had already decided to dedicate their life to those problems, who were actually being brilliant about it, and another question was, "Will I be enough to make a difference in the grand scheme of things?"
I mean, you can be deluding yourself and saying, "Well, I'm so great that I'm going to make a difference," but I don't know. I don't know. Maybe. Maybe not. Then, I discovered, by accident that will be too long to tell, that there was this thing, supply chains, and they were using numerical recipes that were literally 150 years old. They were stuck. They were not even ... My book, they had barely entered the world of 20th century, not 21st. Certainly not. They were stuck somewhere in the 19th century, in terms of the quality of math, and the computer abstraction that they can use to actually resolve those problems, which had a very interesting side effect.
You use that, you might be getting autonomous vehicles on the road in the US, because they are very sophisticated, but I can tell you one thing about those autonomous trucks. The content of those trucks is decided by people who manually tweak stuff on Excel sheets, okay? You have an autonomous vehicle, incredible at artificial intelligence, to have this autonomous AI thing that drive on its own, but guess what? The directions, and the content in the truck, and where the truck is going, all of those decisions are taken by someone manually sitting in a cubicle doing Excel tweaking eight hours a day. You see?
Matt Aaron:The self driving trucks, and so forth, and vehicles, are less automated than we think. It's a lot of tinkering. Are you familiar with Nassim Taleb?
Joannes V:Yes, absolutely. I'm a great, great fan of The Black Swan, Antifragile, and the last one, Skin in the Game. They are all, I mean, piece of art.
Matt Aaron:Yeah, I agree. We'll link to Nassim Taleb's books. I think Skin in the Game was quite interesting. I actually have a couple of political questions for you about France based on some of the things he mentioned, and we'll get to that later. Yeah, I think that he makes a great point, that obviously, academia, there are some shortcomings there. There's no doubt that University of Research has some very smart people, and they contribute to society, but it's maybe overestimated their final contributions to inventions, which is just a lot of tinkering, playing around, breaking stuff, until you find something that works.
Joannes, let's bring in Bitcoin. How did you discover Bitcoin?
Joannes V:I think I discovered Bitcoin in 2011, thanks to probably an intervention from Roger Ver, although it's not overly clear to me, but I think it was probably a talk given by Roger Ver who managed to slip into Hacker News. I'm a very, I would say, recurrent reader of Hacker News, and basically, it made its way to Hacker News, and from there, I read the paper. From there, it had capture, and probably forever, my interest.
Matt Aaronkay. Again, listeners, Joannes is a very intelligent person, but we want to make sure that he explains all the concepts in layman's terms, right, so my grandma could understand this podcast. I want to start with some of your thoughts on Bitcoin. You mentioned the moral compass.
Joannes V:Yes.
Matt Aaron:Explain the moral compass as it relates to Bitcoin.
Joannes V:I mean, it's my own personal explanation, you know. I would not claim to have a universal explanation. What got me interested into Bitcoin, it was not money. It was something that came with the money. Money's required, but it was not what got me interested. Let's jump to what I saw that really got me interested. I think Roger Ver saw exactly the same thing. What got me interested is a very simple idea, is that individual economic freedom, so basically when you are free to earn money by your work ... It doesn't fall from the sky, so you work, it creates wealth. Wealth that you can capture for yourself in a very selfish way.
By the way, it's selfish in the sense that you get the money, but then you can be generous about it, and give it to others. Having the money in your own hands doesn't prevent you from being a good person, and being generous from people that are not lucky as you are of having that much money. You know, for you to be able to be generous, you need to have money in the first place. If you want to be able to give to the poor, first you need to have some money in the first place. If you're poor, you can't give to the poor, because you have nothing to give. Very, very basic thing. What I saw in Bitcoin was an ability for people to just claim, in a very reliable way, secure way, the wealth that they have acquired through their work.
Because they would be able to do that, even if people that are, I would say, evil, that want to enslave them, it will give them a way to kind of one additional degree of protection against people who are just willing to just enslave them. Again, Bitcoin is not going to solve all the problems of the world. It's just one extra little thing, but it can make a difference. It can make a difference.
What captured my interest was, by giving people additional economic freedom, it was a way for people to give them more capability to do good. Obviously, if they want to do good, they have to be good people, because obviously, if they are like criminals, like everything, they will use a hammer to break your window and steal something from your car. That's not because the hammer is bad. It's because the person who is using the hammer is bad.
Matt Aaronure, okay. I want to define these things. Throughout this interview, I'm going to force you to define these things, just in case people are not aware. Economic freedom, why would Bitcoin provide more economic freedom than, let's say, the euro?
Joannes V:I mean, first, I didn't get to choose the euro. I was born too late to have my say in voting for the euro in '92. I was not in legal age to vote. I didn't say I would have voted against the euro, don't get me wrong. I am not saying I would have voted against the euro. What I am saying is that it's very relative when you say it was a democratic vote. Yes, but it was a democratic vote done by my parents, not me. I never got the choice.
People say, "Oh, we have democracies," but the reality is democracies are made of choices made by other people. I never had any vote in most of the laws that apply in France. You know, they were voted way before I was even born. It's not essentially a bad thing, but I never got any way to say, in a democratic sense. Bitcoin, everybody, it's voluntary. Nobody forces you to use Bitcoin. You think that Bitcoin is evil? Don't use it. Nobody's forcing you, but the euro, it's not the same. The euro, by law, I am complied to use it for many things, like paying my taxes and everything.
Basically the euro, I don't get to choose. I'm not saying I'm complaining about the euro, okay? Don't get me wrong. I think Europe has many tons of other problems that are dramatically more important than the euro. Nonetheless, I never got to choose, and I think Bitcoin is bringing choice. If you don't want, you can still walk away. This is not something that you have with the euro, the dollar, the yen, or the yuan. The people that have to use it, the choice has been made for them.
Matt Aaron:Interesting. I like the part right there. It's a choice. It's a voluntary option that people have. Whereas, in many countries much worse off than France, you're forced to use a currency that the value erodes over time. Suddenly, in a matter of months, can become almost worthless. I find that to be pretty interesting. Another concept from Nassim Taleb, remember I mentioned France, he introduced a concept ... Like you said, I agree that Skin in the Game, and Antifragile, and Fooled by Randomness, they're works of art. In Skin in the Game, and for listeners that haven't read, it's about being able to back things up by risking your skin in the game, and understanding what not to do, and kind of the silver rule, meaning that ... We always say the golden rule, treat others the way you wish to be treated. What about the silver rule, which is kind of the corollary? Don't do to others what you wouldn't want done to yourself.
Sometimes that's a little bit easier to figure out. Not what someone wants, but someone doesn't want. It's a little bit easier to figure out. I won't go to deep into that. I think you need to read the book. Like all of his books, they're quite deep, but he mentioned France. There's this concept of upward mobility, which is very important. You see this a lot in the liberal elite in the United States, they talk about ... and Europe, and all around the world, the importance of people in the lower classes who don't have access, can they rise from the, let's say, lower, lower class to middle class, right? That's upward mobility, and that's definitely important. I think we can all agree that it's good to give people a chance, and the ability to move between social classes.
Yet there's something that we never talk about. To me, this was just amazing. It's downward mobility. Downward mobility means, what about being able to fall from your social class? Skin in the Game, right? Betting on something to lose for your opinion, for your convictions, for the top one percent to be able to fall down, more rotation in the upper classes can lead to more equality overall. He mentioned France as an example, because France has very old families, and the top one percent of France stays there. There's much less turnover in France than there is in the United States, which still has a problem at the top. I'm just curious about your thoughts on the concept of downward mobility.
Joannes V:First, it's a very complex situation. At least, I can see ... Being French, I can see the complexity, so I don't want to jump on you by throwing too many things on that, because most of them, unless you happen to be, I would say, a Frenchman quite interested into the French history and the French politics, it will just be plain incomprehensible. I mean, at the core, it's very intriguing to see that when you want to basically promote upward mobility, that's your intention. You want to say, "I want people to be able to elevate." You can do things that have an unintended consequence of actually preventing the reverse. It's, again, hell is paved of very good intentions. You see, you can do plenty of bad even if you intend to do good.
Matt Aaron:Give me an example of that.
Joannes V:For example, France, we are going to give protection to specific, let's say, to civil servants, and for example, employment for life, so they can even be more secure so that they can elevate themselves. Basically, you have union. Employment for life is very, very important. That gives them the security so that they can keep working hard to elevate themselves in different states, instead of being so insecure about their position that they don't have any psychological [inaudible 00:20:57] to pursue this elevation.
Matt Aaron:Joannes, this is similar to like tenure in American universities, right?
Joannes V:Yes.
Matt Aaron:Where you're guaranteed employment, but keep going.
Joannes V:Yeah, exactly. Exactly. Same mechanism. Tenure for professors, or employment for life for civil servant, it's just the same mechanism. You want to secure those people, because you say, "Well, if I secure them, then basically they can be more." To be told, some of them will be able to do more, and to be even more than what they would have been otherwise, but the problem is that when you do that, you also, for a large portion of the people who might not be the heroes, you know ... We have the heroes that will become true heroes thanks to this sort of [inaudible 00:21:38], but then you will have people that just give up along the way. As a consequence, because they resist employment for life, even if you give up on being good at what you do, professor being tenured, or a civil servant, you can never fall back.
Basically, what you do is you prevent somebody else to take your place and be a better civil servant instead of you. It's not just you who is slacking off, where you do the damage. Maybe you're just exhausted, maybe your health is bad. Maybe there is the world that is at you that prevents you from being like the greatest civil servant that France has ever seen. You don't get to choose your health condition, but if you stay in place, you're certainly preventing somebody younger, somebody more energetic, somebody smarter to take your place and do what you cannot.
This is exactly sort of things where sometimes wanting to do good is not enough. The intent is not enough. It has to be real. I would even go further, that at the root of most of the problems that France experience, is the idea that you want to do good, but you're too naïve about it. You want to do good, but you're naïve, and so you end up with a small percentage of people ... It boils down to like a few, tiny percentage of people that can do immense damage, because the system doesn't have a way to flush them out.
I think France, like most functional societies, the vast majority of people are waking up every morning, and they want to do good. It's actually, as an employer, I think it's very rare to see people that are really up to no good. It's very rare.
Matt Aaron:First off, I really appreciate that. I think it goes back to Skin in the Game. The idea that incentives are the best prediction of human behavior. I think when people talk about solving these rather complex problems, there's going to be no perfect solution, but that's a huge problem, and you see this when incentives are not aligned, the way behavior changes for professors once they get tenure. They're like, "I didn't really like having those extra class hours," or whatever it is they had to do before they got ... when they were on trial, we'll say, to be approved for tenure.
Yeah, the same thing happens in the United States. While you're not guaranteed certain jobs, it can be very difficult to lose a job with a state or federal government. Joannes, and this is interesting, too. The whole idea of choice. I think a lot of Bitcoin comes down to that, but only having access to one currency, whether that's the euro or the US Dollar, at the same time, who creates that money, and those are the banks, and the mint, and the federal reserve, at least in the United States, which goes hand in hand with the government, right? As you see with competition, my favorite example is Uber and taxi. Uber is a choice. You never have to take Uber, but I can tell you at least in Colombia and the United States, that having the option of Uber has made taxis better, because of that competition. I think that goes down to the choice.
I want to lead into my next question. This is from your paper, "Weirder Bitcoin." Quote, "Bitcoin is cash. Not out of convenience, but out of necessity, because cash is the most unifying social contract known to humanity to induce virtuous behaviors." Cash being a social contract to create virtue, please explain that to us in layman's terms.
Joannes Vkay. I think a very profound question is, "What makes a man a man, a woman a woman? What makes us so different?" People have been trying to get the answers. For example, at [inaudible 00:25:18], laughing is what has make us human, but that's not true. Big ape, they do laugh. You can make a joke and get a chimpanzee to laugh. Sense of humor is not something that is defining humans. Chimpanzees have a sense of humor. It's surprising, and then you would say, "Oh, using tools." No, there is plenty of animals that use ... I mean, very primitive tools, yes, so tools is not ... You say, "Oh, we build houses." No, there is plenty of animals that build shelters and everything, so it's not.
One of my very basic explanation, if I had to define, [inaudible 00:25:57] Clark had a crazy definition of, "How do you define sentience?" He was saying, "Well, you are able to maintain life in orbit." Okay, that's a crazy science fiction perspective. If you're smart enough to have astronauts that don't die from vacuum, they are probably sentient, but like super weird science fiction definition. By the way, it would mean that humanity did not manage to become like humans before the space age, which is kind of weird as well.
My very basic, down to Earth explanation, would be commerce. If there is one thing I have never see anything that is even close in the animal kingdom, is commerce. When you think about probably the greatest invention ever, I mean, after fire. What was maybe the second greatest invention of humanity after fire? It was writing. Why did people start to write? They didn't start to write poetry. They started to write accounting stuff. If you go to [inaudible 00:26:56] remains, is they didn't start writing because they wanted to record poetry, a very fancy novel. No, it was for accounting, and actually supply chain. People wanted to count how many sheeps I'm going to sell you, what is the depth? Then, as soon as you start to do commerce, you need a lot of numbers. You can't just commit them to your head, so you need to write them.
Then, as you start writing more and more numbers, then you can say, "Oh, maybe I can write something else than just plain numbers," and then here you go, you have writing. You see, commerce and economic exchange, I would say, are fundamentally human. I mean, it's literally what the civilization were born out of commerce. The reason why cities started to appear was an effect of commerce. If you want to have commerce, people need to gather in one place and exchange. If you do that for long, what you end up with is a city.
See, it really boils down to what makes you human, and I would define, commerce makes you human. The simple fact that you can exchange, and you can exchange over long distance. You know, animals can share their food as well, but you know it's a very local thing. They're not going to transport food from one region of the world to the other, to have an exchange, and go back the other way. No, no. It's a purely human thing. I would say, commerce is that.
That brings me to Bitcoin. Why Bitcoin is a necessity. Why is cash a necessity? It's because, I believe to a large extent, Bitcoin did capture something that was essential in being human. Something that is essential to the point that it almost define you as a human being. In a better way than your DNA. Again, your DNA is 99.9% of your DNA of the one of the chimpanzee, but my grandma would argue that she is not a chimpanzee, and she's right. She is not. She is not a better chimpanzee, she is something very different. I would say, and reason is like most humans, she could actually engage in shopping, which chimpanzees would never do.
Matt Aaron:Great explanation. Yeah, I think the public sometimes look at commerce as cold in business, but I look at it as the opposite. Doing business with people around the world, working on teams at Bitcoin.com with people from around the world. Commerce can bring people together. It can bring peace in between human being from different cultures, and countries, and cities. I think Taleb talks about that in the Levant, without going down too far of a rabbit hole. Yeah, that's a great definition.
Joannes V:Exactly. Just think of what is the opposite of a marketplace? I mean, somebody has, that you see across the street, has something that you'd like to have. You don't have it. What is your option? I mean, option one, you just attack this person and you take it. That's like, "I'm going to raid." Basically, that's what monkeys would do. If a tribe of monkeys see something form another tribe, that the tribe of monkeys that they want, they're just going to attack and maybe even kill some of the members of the other tribe to take it.
Humans would say, "No, maybe we can trade. I'm just going to give you something that is a bit nonsensical, like a piece of gold, and then you're going to give me what I want, and nobody will have to fight." We don't have to be like bloody apes. You see, it's also a way to resolve the fact that you don't have everything you want. Nobody has all the things that they want, and we can resolve those matters by not being violent. It's a way to just do it in a way that is nonviolent. If the merchant tells you it's a price that is staggering, you say, "Wow, it's so expensive. Sorry, I'm not buying that." You walk away, but you don't punch the merchant in the face because he was so aggressive to put a price on display that you think is not representing the real value of what he has to sell. You walk away. That's commerce.
Matt Aaron:For sure. A side note, have you ever read The Coffee Trader? It's a fantastic book. It's like a historical fiction about Portuguese coffee trader in 1500s or 1600s, I won't be able to tell you what dates, but I'll send you a link to the book after we're finished. It talks about that.
Joannes V:I haven't, but it looks fun.
Matt Aaronh, it's fantastic. You got to check it out. Listeners, as well, we'll link to all these books that we talked about today. Joannes, that's interesting. You've talked about the importance of economic freedom and how cash is a form of expression, and it's unique to human beings, to homo sapiens. Another thing that people talk about is mining. You see, in the news, they're like, "Oh, well, by 2022, if Bitcoin keeps up at this rate, all the electricity used for mining, we won't have enough on Earth. It's a waste. Blah, blah, blah."
You mentioned that proof of work, also known as mining, listeners, you called it the purest form of conversion of electricity into trust. If you could break that down, again I'll say layman's terms, why is mining, proof of work, the purest form of conversion of electricity into trust?
Joannes Vkay, let's keep it, I would say, [inaudible 00:31:55], because again, a very complicated question. First thing, I would tell, is when you see a lot of people doing something that appears to be very strange, I mean, that's what life taught me, that usually there is a reason that you don't understand. Again, those people that are doing that, they are not idiots. I mean, you cannot assume that hundreds of thousands of people are doing something, the same thing, just because they are all idiots. Usually, it's because there is something that makes sense. That's why religions, from afar, you would say, "Oh, that's so weird. Why do they do that?" There is usually some very, very good reason for them. It's just that they are difficult to comprehend.
First, I would say, when you see mining, and there are all those people who are doing things that appears to be making no sense at all, my first advice to people who are listening would be, pause for a second, and just try to maybe assume that there is something that you don't know, there is something going on that cannot just be explained by there is so many people who are just a big bunch of idiots. It's safe to assume that it's maybe more than that. Especially because it has become so big. Probably there was something big as well.
Okay, now what is this something big? The problem is that money is all about trust. You want to do an exchange for commerce. You want to, for example, somebody is going to sell you sheep, and you would think that, "Oh, I'm directly going to give this person, let's say, I don't know, I'm just going to give him something like a cloth. We are going to bargain something for something." The reality is, no, you're giving money. By the way, I believe that humanity never went through the bargaining phase. It was money from the very beginning, but that's a different discussion.
Basically, you exchange something that is very real for something that is fundamentally not real, that is money. You need to trust that this very thing, that is weird, that is money, is still going to be worth something later. It's all about trust. Now, the question is the quality of the trust you can have in the money will define pretty much the quality that you have in the money itself. You know, the quality of the money is pretty much defined by the amount of trust. Now, the problem is that who is in charge of this money, making it work? Somebody has to be in charge. I mean, even if it's gold, you need to have somebody to mint the gold. No matter how you do it, as soon as it's physical, somebody has to take care of it. It doesn't fall from the sky.
The question is, can you make sure that those people have, it's in their best incentive to do whatever they can to make sure that your money remains money? For example, people would say, "Oh, gold is good." I say yes, but if you look at history, what people were doing was, you had a piece of gold, you know a gold coin, and they would actually scrap some parts of the gold coin. Actually the coin would look like a one year old gold coin, but actually they would scrap some parts, so that the coin would, over time, get lighter and lighter so you had less and less gold into your coin. You see, you had problem of trust and many way to cheat the system.
Especially the people who are minting the coins, they can cheat by minting a coin where it's still printed one euro or one whatever, and then actually it's a smaller coin. They do it gradually so that nobody can see. There is a history of that. Again, it's all about trust, and the problem is, how do you have a money where you do not create incentives, so you create rules of the game so that nobody has an interest of cheating? That's a weird way. The very bizarre things about Bitcoin is this proof of work is by creating a sort of work, a very special sort of work, that cannot be gamed, or kind of. I mean, it can be only be gamed ... What do I mean by gaming the work is that you can do this thing, which is maintaining the money, and creating wealth for yourself on the side as a way to kind of game the system.
Again, it's all about gaming the system, because these things that you make on the side can actually make the money, degrade the money to the point that you cannot trust it as money anymore.
Matt Aaron:That's interesting concept, but why is making money on the side, why would that degrade the trust?
Joannes V:Let's imagine, for example, that I can have a computer ... Instead of doing some kind of nonsensical algorithm of hashing as it is done for Bitcoin right now, so-
Matt Aaron:This is the current type of mining.
Joannes V:Mining is basically a sort of solving puzzles. Very weird sort of puzzles that serves no purpose whatsoever. What about solving a puzzle that would make sense? People who are, for example, discovering new drugs. Discovering new drugs.
Matt Aaronr protein folding, or something like that.
Joannes V:You can have computer puzzle where you can even define a molecule where you can invent a new drug, and that's your computer game. Then, the problem is, if you do that, and I discover a new drug, what is my incentive? I am a pharma company, I want to keep this thing private. Why? Because I want to patent it. You see, I'm solving a problem, but if my solution is very good, then it's in my interest to keep it hidden for a while until I get my patent. You see, I end up with ... Suddenly, I'm not so much involved into preserving money, I'm involved into actually making better drugs, which is a good thing. I mean, we need better drugs. There are certainly terrible diseases out there.
You see, I don't what that the effort of people creating drugs should not disrupt and potentially demolish works against the money. It has to be kept separate by design. The weird part, and that's where Bitcoin has been very, very [inaudible 00:37:43], is that you can actually engineer something that is cap isolated. That's what proof of work is about.
Matt Aaronroof of work is keeping isolation and using electricity to convert electricity into trust, into this freedom we talked about. You mentioned in the beginning, with your company, problems and solutions, right? Focusing on the problem, lack of trust, censorship, control, lack of democracy in money. Making sure that these solutions are toward the actual problem. Then, incentives make sense, too, because you have skin in the game. You have to risk the [inaudible 00:38:18] mining, the graphics card's computing power, and the electricity to pay for that in order to secure the network. Fantastic.
Now, one last question to finish off here. Another interesting quote from this whitepaper, or whatever you want to call it, weird paper. "There can only be one Bitcoin, because economic freedom is not additive. Additive meaning that freedom is freedom. You can't double freedom." Explain that to us.
Joannes V:The only explanation I could think of that was really kind of making sense was also kind of a joke, that is listed in the paper, that just think of the US Constitution, just because include the first amendment twice at the very beginning, does that make you more free? You have the first amendment, and you say, "Oh, maybe we need more of it. First amendment was not enough, so now we are going to have a copy of the first amendment just below the first one, except we're going to repeat it louder, maybe in all caps. Internet style." We have the first amendment, and then we write it again, all caps below, very loud. First amendment again. Are you more free that way? Maybe not.
That's why once you have something that kind of give you some kind of freedom, you don't need it a second time, because you see, freedom is really something that we have the right to vote, it's not because you have a second mechanism to have the same right to vote. In the end, you still have one vote. For example, another way is in France, there is many, many ways to gain the French citizenship. You can gain the French citizenship because you're born physically on French ground, you can gain French citizenship because one of your parent was French, you can gain citizenship because you do a PhD in France, you can gain citizenship because you have been working for years, paying your taxes in France. In the end, you can only gain French citizenship once. There are plenty of methods, just it's freedom that you can gain by getting the French citizenship, and the same would be in the US, you can only get it once.
It's not additive, and there are a lot of things that are not additive. Again, just think of it, it's not because you have your money and you split your money between euros and yen that you have more money. In the end, you just have more or less the same thing, and it's maybe just a fluctuation that will make you richer or poorer, but it's not the fact that you've split your money across two currencies that that makes you richer.
Matt Aaron:Cool. Would you agree with the concept of the internet of money? You know, we have one internet, and same with Bitcoin, so we only need one Bitcoin, not multiple cryptocurrencies.
Joannes V:Yes, completely. I would say, to the people who don't really get it, and say, "Oh, but we can do this coin that is going to be better that way." I would say, "But Bitcoin is an ideal. Bitcoin is not something static. It's something that is where people aspire for Bitcoin the best." If Bitcoin has a problem, so for example, Bitcoin doesn't scale enough, well, guess what? Actually, it can be made scalable. Actually, the particle is already quite good. It can scale. It just needs better software implementation. You see, fundamentally, it's an ideal.
People say, "Well, we want that as well, because there is some sort of thing that Bitcoin cannot do, and that is truly [inaudible 00:41:23]. This is what Bitcoin can become." The reality is, Bitcoin was incredibly correctly engineered from day one. I don't know who, whether this person or those people, whatever, who came up with this thing, but clearly it was not a one week effort. It was probably, I don't know, half a decade into that. I don't know. It's staggering how much effort went into crafting this thing. It was literally years of effort. They had been thinking very, very carefully about a lot of problems ahead of time.
It was just for one reason. It was they knew, I believe, that it would be difficult to improve Bitcoin afterward because once you have defined your digital coin, one thing that people don't get is that it's very, very hard to modify a digital coin after inception. Why? Because if you modify the digital coin, you end up destroying money. You end up in a situation where you say, "Oh, don't worry. We are just going to improve Bitcoin, and yet, sorry guys. Your money's going to get destroyed in the process. Very, very, very sorry." No, those people who are getting the money destroyed, they are dead against. You need to get the things very, very right from the very beginning, and the only thing that whoever Satoshi Nakomoto was, the only thing that he didn't get right was a complete industrial grade implementation for all the parts of Bitcoin. It was more like a prototype client for a very carefully thought framework and protocol.
The protocol was incredibly tight. The thinking, the economic thinking was incredibly tight. The software implementation was just like proof of [inaudible 00:43:01]. That's where we are right now. Yes, Bitcoin maybe can be improved upon, maybe, and if there is really good solid reason, it will, but I would say, when you have something that has been working quite successfully for 10 years, you just don't want to break it just because you're kind of ignorant about the way it works.
Matt Aaron:Great explanation there. Well, listen. Joannes, thanks so much for coming on the show. I really appreciate your perspective here and I'm hoping listeners will have some ideas to think about. You know, why Bitcoin needs to stay weird and the purpose it serves. Yeah, enjoy your weekend. I hope to have you back on soon.
Joannes V:Yes. See you soon. Bye bye. Thank you. Great questions.
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